Edinburgh office rents and property value outperforming most of UK

Demand for office space in Edinburgh is still outstripping supply, say Savills

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With high demand, lack of development and limited choice, Edinburgh, Brighton and Cambridge are top for combined higher rental value growth and increases in capital values.

Edinburgh rents increased by nearly 2% and capital value by more than 7%.

Glasgow, Oxford and Nottingham have seen no or limited growth in capital values but their strengthening occupational markets have driven rental growth. Glasgow capital value rose by about 3.5% and rents only marginally.

Aberdeen was the lowest of the cities analysed in terms of both, contracting 6% for rental and 3% for capital growth.

Rod Leslie, director in the investment team at Savills in Edinburgh, said: “Low yields in Edinburgh reflect the potential for rental growth and lack of risk however despite the strong level of investor demand, the level of activity continues to be hampered by a lack of opportunity.

"By investing in Edinburgh you are investing in a landlords' market as supply is so limited and with its World Heritage status there will be restricted opportunity to change this dynamic. Regardless of Brexit, the simple economic argument around supply and demand of good quality offices is very compelling.”

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Steve Lang, director in Savills commercial research team, added: “Overall, the analysis shows quite how much a market’s position in the property cycle can impact short-term returns.

"For example, some have been ‘hit’ with short-term structural shifts impacting from a weaker local occupational markets, such as Aberdeen, where oil price falls have led to lower valuations, but despite having been a lower performing office market in the current cycle, it is still a key city expected to out-perform as sentiment recovers.”